How the EPA’s new oil and gas standards will reduce greenhouse gas emissions

The U.S. Environmental Protection Agency recently issued final rules to reduce air pollution at natural gas wells and other sources in the oil and gas industry. The rules—a New Source Performance Standard (NSPS) for volatile organic compounds (VOCs) and National Emissions Standards for hazardous air pollutants—establish the first federal standards for emissions from production wells (natural gas processing plants were already covered). They are designed to limit the release of VOCs and other air toxics that contribute significantly to smog and are associated with a wide range of adverse health effects. (For more on the oil and gas rules, see M.J. Bradley & Associates’ Issue Brief.)

In addition to reducing VOC and air toxics emissions, these rules will help reduce methane emissions from shale gas development. According to the EPA, there are over 11,000 new hydraulically fractured wells each year, and while water-related environmental concerns have received the lion’s share of public attention and are the focus of EPA’s ongoing hydraulic fracturing study, uncontrolled emissions from hydraulic fracturing can negatively impact air quality and the climate.

Climate benefits of new rules

The EPA estimates that when the new rules are fully implemented in 2015, they will result in an annual reduction of between 1 and 1.7 million tons of methane, equivalent to 19 to 33 million metric tons of CO2.

This translates into removing 4 to 8 million cars from the road each year. From a climate change perspective, methane is the second most dangerous greenhouse gas, after carbon dioxide, and is much more powerful at trapping heat. In fact, the global warming potential of methane is 72 times greater than CO2 over a 20-year time frame, and 25 times more powerful over a 100 year period. According to the EPA, natural gas systems—including extraction, processing, transportation and storage—represented the single largest source of methane emissions in the United States, accounting for 32 percent of all methane emissions in 2009. It is likely that these emissions have increased in the past few years due to the rise in shale gas development.

How the rule achieves these reductions

The new standards require that most fractured and refractured gas wells undertake “green completions” (also known as reduced emissions completions) to reduce VOC emissions. Green completions involve a process for capturing natural gas leaked from wells while the drilling, fracturing, and reservoir fluids are expelled (a process known as well completion). In short, when a well is green completed, owners or operators use equipment to capture any gases that reach the surface with drilling liquids during a well completion, thereby reducing emissions of both VOCs and methane. This new requirement becomes cost-effective when developers capture and sell natural gas that is otherwise leaked, vented or flared.

During the comment period for the NSPS rules, industry stakeholders expressed concerns about the availability of some equipment required to perform green completions. The EPA’s response to these concerns was a gradually phased implementation plan, requiring full attainment in 2015. When fully implemented, the EPA expects a 95% reduction in VOC emissions from production wells, processing plants, transmission pipelines, and other segments of the supply chain (minus distribution, which is not covered by these rules). The rules include incentives for companies to comply earlier than required, and EPA estimates cost savings to industry from sales of gas captured during green completions on the order of $11-19 million per year, though other estimates have come in even higher.

Currently, several states and cities already require the use of green completions, and some gas companies are using them voluntarily, which should help the natural gas industry comply with the new rules over their phased implementation between now and January 1, 2015.

The new oil and gas rules are a good start toward reducing emissions of air toxics and greenhouse gases from new and refractured wells. It is unclear if EPA will adopt further standards, such as requiring companies to measure and disclose emissions data from shale gas sources, aimed directly at greenhouse gas emissions from natural gas systems. But these new rules are a common-sense start that will benefit human health, the environment, and even the natural gas industry’s bottom line.

Although these rules do not explicitly address GHG emissions, we are encouraged by these steps taken by the EPA, which can help put the United States on a path to meet its commitment of reducing GHG emissions by 17 percent below 2005 levels by 2020 and by 83 percent by 2050.